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A tough year for SA’s residential property market

A positive turnaround will depend on what the 2019 elections bring for SA, says Dr Andrew Golding, Pam Golding Property Group CEO.

NOMPU SIZIBA: Pam Golding Properties has recently released its annual residential property report for 2018. The report gives an idea of the state of the property market, regionally and nationally, and it takes a look at the macroeconomic environment, which impacts on the residential property market.

To get an idea of what this year’s picture looks like, and what the sector’s fortunes will be for the next, I’m joined on the line by Dr Andrew Golding, chief executive of the Pam Golding Property Group.

Good to have you one the show, Dr Golding. Nationally speaking, year-to-date, how have you seen the residential property market perform?

ANDREW GOLDING: It’s clearly been a tough year. I think after the initial euphoria following President Ramaphosa’s appointment, there has been a sense that the market has quietened down off the back of the economic and political environment we find ourselves in, And, with a view to next year’s election, we are certainly seeing a slowdown of the market pretty much across the board.

But, all things considered, the property market has been very resilient for a number of years and our expectation is it will continue to be so until the next upturn comes, which is hopefully going to be after a positive election result.

NOMPU SIZIBA: I see you’ve noted that properties below the R3 million price tag have seen some price acceleration, but properties priced above that level seem to be experiencing price deceleration. Is this just a factor of the economic situation?

ANDREW GOLDING: I think so. We’ve definitely seen across the board the market slowing down, and in different price categories and in different geographies there have been some regional and city specifics. But generally speaking the middle of the market, which for us is between R2 and R4 million, has performed better than the top end. But that is off the back of the top end having had a very good run for the past couple of years.

NOMPU SIZIBA: While the Western Cape continued to experience house price inflation that is higher than, say, Gauteng and KwaZulu-Natal, the pace of growth appears to be slowing – according to your information. Why is that, and why for a long time has its average growth overshot the national average?

ANDREW GOLDING: The Western Cape has certainly benefited from the most positive consequences of the property market, and it has run for quite a while and definitely needed to slow down. I think it has done that. So it has come off significant growth.

At the same time we’ve seen other centres like Gauteng and KwaZulu-Natal improve and, generally speaking, we are now seeing a similar market across most of the major metros in the country.

NOMPU SIZIBA: It is interesting that your report notes that there are certain up-and-coming areas which remain affordable to regular South Africans, which are proving ‘sexy’ – if I can say that. Where are some of these areas and, when such areas become saturated in terms of demand, could they be considered future gems?

ANDREW GOLDING: I think what we are seeing is that the traditional high-priced areas of the country are continuing to be exactly that, and as a consequence the more fringe areas or less traditionally positive areas are coming into their own. This is primarily based on affordability and the fact that value for money is a really key component for most home buyers, whether that’s the bottom end of the market, the middle of the market or the top end.

As a consequence we are seeing a range of different areas come into their own while the more traditional areas are seemingly a bit more stagnant.

NOMPU SIZIBA: What about the rental market? How much traction has that had this year? Very recently we had a discussion with one expert who suggested that increasingly people are struggling to keep up with their rental payment obligations because of economic constraints.

ANDREW GOLDING: I think the rental market is a complex one. At a type of macro level we see supply and demand almost equalised, but not quite. So demand is still slightly outstripping supply. But I think, like in the sales market, in the rental market one needs to drill down into various micro levels to find out exactly what’s going on. There is no doubt that overall the macroeconomic picture is not a good one, and so it is logical that certain people are struggling to keep up with rental payments. But at the same time there is an increase in rental demand, because rental generally is proving to be more popular – in particular as first-time home buyers are struggling to get onto the property ladder and, as a consequence, are renting.

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NOMPU SIZIBA: What are your observations about young home buyers, their preference of property type? And, as we’ve discussed previously, is there more of an appetite among the younger buyers to do much of their property transactions through digital means?

ANDREW GOLDING: Yes, the interesting factor that the average age of the first-time home buyer, according to Uber, is 34 years. So that is, generally speaking, older than one would like.

But, having said that, there is obviously a healthy appetite from first-time home buyers to acquire a property. What we are finding is that home buyers across the spectrum are using a variety of mechanisms as a preference in terms of being able to purchase property. That is not exclusively digital, but it is certainly not exclusively on the traditional methodology. From our point of view we are looking to provide a comprehensive range of options to all home buyers, whether through the new, hybrid methodology or the existing traditional methodology, both of which I think have a place.

NOMPU SIZIBA: You indicate that you’ve been involved in up to R3 billion worth of wine-farmland property transactions over the past five years. What sort of people are buying this land, and what sort of conversations are being had around the current land debate? Do you expect the quantum of deals in this area to be limited, given that some people still deem the policy situation to be uncertain?

ANDREW GOLDING: I think the agricultural land sold is predominantly in the Western Cape and predominantly in the wine-growing areas. So that doesn’t represent the commercial farming component of the country generally. The buyers are from very many different walks of life. There are local buyers as well as international buyers. And, notwithstanding some uncertainty around the land debate, there still is an appetite from people who believe that the country has great promise and that in particular wine-growing on both a local and a global scale represents huge opportunity.

So our expectation is that that is going to continue, notwithstanding the fact that there is uncertainty around the expropriation issue.

NOMPU SIZIBA: Sticking with the expropriation issue – given that property is your bread and butter – generally speaking, when you interact with potential buyers, potential sellers, what are the conversations that you are hearing? Is there a lot of concern or not really? Are people just going with the flow, with the process?

ANDREW GOLDING: I think there is optimism that sense will prevail and that an ordered and a well-thought-through solution to the land issue will be found. The messaging coming out of the government in recent times has been that. I think we have to accept that we are in an election cycle, and therefore that between now and the election the rhetoric is going to increase – and the temperature of that rhetoric is going to increase. Notwithstanding that, there is hopefully a sense that a sensible solution will be found to the land question, which is an important question to resolve. So I think that most people are of the view that, notwithstanding the rhetoric, there will be a solution found here which will be satisfactory.

NOMPU SIZIBA: It’s interesting that of the property owned by foreign investors, some 20% of those investors are African, with Gauteng being a real drawcard for them. Just tell us about that.

ANDREW GOLDING: We have definitely seen an increase, over the last decade or even longer, in African investors looking to invest, predominantly into the Gauteng market but generally speaking into the country. That’s based on pure investment criteria, but also based on the fact that some of them are looking to educate their children in Johannesburg.

Others are starting businesses in Johannesburg or have South African businesses. As a consequence we’ve seen a significant increase over the past decade in the proportion of foreign buyers who are in fact African. That doesn’t take away from the fact that South Africa is to a limited extent still attractive to our traditional foreign markets, which are predominantly European and to some extent Asian markets.

NOMPU SIZIBA: With the economy still some way from finding its feet and talk that our Reserve Bank may raise interest rates sooner rather than later, what’s your outlook for 2019?

ANDREW GOLDING: I think we are in the current environment for at least until the election happens, and then I think a lot will depend on the result of that election, on the extent to which the mandate is to go forward and grow the economy. I think that if the election result is positive in terms of that mandate we could see a positive turnaround in the property market quite quickly, because it is poised for that. But it will all depend on what May brings for us.

NOMPU SIZIBA: Our thanks to Dr Andrew Golding.

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